EMC 2002 Annual Report Download - page 75

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Based upon EMC's historical experience and information known as of December 31, 2002, EMC believes its liability on the above guarantees and
indemnities at December 31, 2002 is immaterial.
3 1/4% Notes
In March 1997, EMC sold $517.5 million of 3 1/4% convertible subordinated notes due 2002 (the "3 1/4% Notes"). The 3 1/4% Notes were generally
convertible into shares of Common Stock at a conversion price of $5.67 per share, subject to adjustment in certain events. Interest was payable semiannually
and the 3 1/4% Notes were redeemable at the option of EMC at set redemption prices (which ranged from 100.65% to 101.3% of principal), plus accrued
interest, commencing March 15, 2000. On February 15, 2000, EMC announced that it would redeem all of the outstanding 3 1/4% Notes. As of March 15,
2000, all outstanding 3 1/4% Notes were converted into shares of Common Stock.
6% Notes
In May 1997, Data General sold $212.8 million of 6% convertible subordinated notes due 2004 (the "6% Notes"), which were assumed by EMC in
connection with the acquisition of Data General in 1999. The 6% Notes were generally convertible into shares of Common Stock at a conversion price of
$41.91 per share, subject to adjustment in certain events. Interest was payable semi-annually and the 6% Notes were redeemable at the option of EMC at set
redemption prices (which ranged from 100.857% to 103.429% of principal), plus accrued interest, commencing May 14, 2000. On April 14, 2000, EMC
announced that it would redeem all of the outstanding 6% Notes. On May 18, 2000, $212.6 million of the 6% Notes were converted into shares of Common
Stock. EMC paid approximately $155.0 million in 2000 to redeem the remaining 6% Notes.
Litigation
In April 2002, EMC filed a complaint against Hitachi, Ltd. and Hitachi Data Systems Corporation (together, "Hitachi") with the International Trade
Commission ("ITC") and in the United States Federal District Court in Worcester, Massachusetts. The ITC complaint alleged that Hitachi had engaged in
unlawful activities by importing into the United States products that infringed six EMC patents. EMC asked the ITC to issue an injunction to block
importation of Hitachi's infringing products and in May 2002, the ITC voted to commence an investigation into EMC's claims. The suit in District Court seeks
preliminary and permanent injunctions as well as unspecified monetary damages for patent infringement. In June 2002, the suit in District Court was stayed,
pending the outcome of the ITC action. Subsequent to the date EMC filed a complaint against Hitachi, in April 2002, Hitachi and Hitachi Computer Products
(America), Inc. ("HICAM") filed a complaint against EMC in the United States Federal District Court for the Western District of Oklahoma alleging that
certain of EMC's products infringe eight Hitachi patents and seeking preliminary and permanent injunctions as well as unspecified monetary damages for
patent infringement. In July 2002, this suit was transferred to the United States Federal District Court in Worcester, Massachusetts. In March 2003, EMC and
Hitachi jointly announced that the parties had entered into agreements whereby they agreed (i) to settle all pending patent infringement claims between EMC,
Hitachi and HICAM, (ii) to cross-license their respective patents and (iii) to a framework for exchanging technology in the form of storage-related APIs. In
accordance with the cross-license agreements, EMC will receive payments from Hitachi, which EMC will classify within software revenue and recognize
ratably over the term of the agreements. The cross-license agreements expire at the end of 2007. On February 27, 2003, EMC and Hitachi filed a Joint Motion
with the ITC to terminate the ITC investigation on the basis of the above-referenced agreements, and on March 11, 2003, the ITC judge signed an order
terminating the ITC investigation. The parties intend to move to dismiss the district court actions referenced above once the ITC judge's order has been
accepted by the ITC.
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